UK rules prompt businesses to report on slavery in their supply chains

According to the 2016 Global Slavery Index, an estimated 45.8 million men, women and children around the world are ensnared in some form of modern slavery, which includes slavery, servitude, forced labor and human trafficking. Sub-Saharan Africa is particularly vulnerable to this scourge: Estimates of modern slavery in Sub-Saharan Africa accounted for approximately 14 percent of the world’s total enslaved population in 2016, with the Central African Republic, Democratic Republic of Congo, Somalia, South Sudan, Sudan and Mauritania having the highest rates of modern slavery in the region.

Increasingly, businesses are called upon to demonstrate efforts to tackle slavery in their supply chains. Last year, the UK government introduced a legal requirement for certain large businesses to make annual statements on actions taken to eradicate slavery and human trafficking from their businesses and suppliers, known as the Modern Slavery Act. In late September, the publication deadline for the first companies caught by the rules expired. In forcing transparency, the requirement is intended to incentivize large businesses with the resources and market influence to address current practice and take steps to reduce their global footprint in labor exploitation. The requirement mirrors the requirement introduced in 2012 under California’s Transparency in Supply Chains Act.

Businesses, wherever incorporated—which includes US companies—are caught by the requirement if they (i) supply goods or services; (ii) carry on a business, or part of a business, in the UK; and (iii) have an annual turnover above £36 million (approximately $44 million). All businesses meeting these requirements must publish a “slavery and human trafficking statement” each year describing steps taken (if any) during the previous year to ensure that slavery and human trafficking is not occurring in the business, including its supply chain. The statement must be approved by the board of the relevant entity, signed by a director or partner, and published on the company’s website. If more than one company in the group is caught by the requirement, subsidiaries may use their parent’s statement as long as the statement covers the steps each company has taken in the relevant year.

A UK registry of statements shows that over 750 companies—the majority of which are headquartered in either the UK or the US—have now published statements. While the legal requirements themselves do not obligate businesses to produce extensive statements or reports, current market practice strongly suggests that businesses across a variety of industries—including manufacturing, energy, technology, pharmaceutical, utilities, food and drug, consumer products, and professional services—are doing more than is strictly necessary to comply with the regulations.

Unsurprisingly, few (if any) statements indicate that no steps have been taken, though such a statement would satisfy the requirements. Common initiatives include updating procurement policies and procedures to include verifying suppliers’ compliance programs, establishing internal training platforms, carrying out on-site audits of high-risk suppliers and conducting internal audits and risk assessments of the organization’s supply chains to determine which countries, industry sectors or business partnerships are at risk of harboring modern slavery practices. Companies with supply chains operating out of Sub-Saharan Africa might, for example, wish to consider the 2016 Global Slavery Index’s finding that human trafficking and forced labor are of particular concern throughout the region, especially within industries such as farming and fishing, retail sales, manual labor and factory work.

Legal sanctions for non-compliance are limited to a possible injunction to compel publication of a statement. There are no fines, unless non-compliance is in contempt of a court order to publish. Currently, the main compliance driver is, of course, reputational. The central repository of statements facilitates the comparison of approaches and levels of commitment by businesses and it is expected that consumers, investors, regulators and non-governmental organizations will apply pressure to those businesses that have failed to sufficiently engage with the reporting obligations.

The UK government hopes that these reporting requirements will, year-on-year, encourage pro-active monitoring of supply chains by businesses, help foster transparency in labor standards and ensure that organizations all over the world are held to account for modern slavery within their supply chains, whether operating in Africa or elsewhere.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.